Here come the European bond markets again, driving spreads on Irish, Greek, and Portuguese bonds to near record levels.
Bottom line: Sovereign defaults by one or more Euroland countries are a certainty.
And Euroland will not be helped by the utterly foolish austerity programs undertaken so far, which do nothing other than guarantee social upheaval and more bank failures.
What’s needed is what’s been obvious all along: a recognition that you can’t run a single currency regime solely for the benefit of one country (Germany).
The Irish, Greeks, and Portuguese would be much better off leaving the Euro, devaluing their currencies, and defaulting on their debt until such time as a semblance of export-driven growth returns.
The Germans, who have been playing beggar thy neighbor for several years, need to gin up domestic consumption.
The ECB needs to cut interest rates and do a lot more quantitative easing.
All of these countries need to drop extend and pretend, stop worrying about confidence fairies and non-existent inflation, and start promoting economic growth and domestic consumption directly through government spending.
The US needs to be doing exactly the same thing, or will it be years before anything good happens in the world economy.
Gorilla says: “What began in May as contagion will be back as contagion in September!”
